It’s been clear for some time that the Australian Energy Regulator (AER) would make large cuts to future allowable revenues for Energex and Ergon, and that this would potentially impact Queensland Government dividend income. The preliminary determinations from the AER were released last week and they were as brutal for the businesses as expected, and Ergon in particular is facing some tricky questions about how it will cut its costs (see Ergon Energy has “no plans” to cut staff after nation’s energy regulator cuts revenue by 30 per cent).
With Ergon (and Energex) remaining in public ownership, it will be difficult to make the large job cuts required to achieve the necessary efficiencies, given that political considerations will inevitably intrude. Ergon appears heavily over-staffed, and the Government itself is being questioned about possible job losses that might result from the proposed Energex-Ergon merger (see Opposition calls to end power jobs uncertainty). With political considerations at play, it’s likely over-staffing won’t be reduced enough, and this will have significant budgetary implications, being reflected in lower dividend payments to Government.
Related previous posts include: